Trends in Borrower Equity

By rchrisman@robchrisman.com

(Thanks to GB for this one; warning - Rated PG I guess.)

A guy goes to the supermarket and notices an attractive woman waving at him. She says hello. He's rather taken aback because he can't place where he knows her from.

So he asks, "Do you know me?"

To which she replies, "I think you're the father of one of my kids."

Now his mind travels back to the only time he has ever been unfaithful to his wife and says, "Are you the stripper from the bachelor party that I made love to on the pool table with all my buddies watching while your partner whipped my back with wet celery???"

She looks into his eyes and says calmly, "No, I'm your son's teacher."

Here's a letter that, as a lender, you probably don't want to receive from the CFPB. Remember that the CFPB runs HMDA now, and fired this shot across the bow to 44 lenders. "The letters say that recipients should review their practices to ensure they comply with all relevant laws. The companies are encouraged to respond to the Bureau to advise if they have taken, or will take, steps to ensure compliance with the law." (I was unable to pull up the actual letter - must be my computer.)

In terms of products, FormFree's founder and CEO Brent Chandler writes, "Rep and warrant relief for automated income and asset verification through The Work Number and AccountChek is a signal to the industry that the paper-based era of mortgage lending is coming to an end. Mortgage technology has finally evolved to the point that lenders can base their decisions on direct-access data - untouched by human hands - and be relatively protected against buyback requests by doing so. This announcement is the culmination of an extensive pilot with Fannie Mae, and to be the first announced preferred provider for automated asset verification is simply phenomenal."

 What have recent 3^rd quarter earnings announcements from those feisty private mortgage insurance companies told us about industry trends?

 MGIC Investment Corp. beat some estimates due to lower incurred losses driven by positive reserve development and higher net premiums earned. NIW (new insurance written) was strong at $14.2 billion vs. $12.4 billion a year ago, and book value increased to $7.48 from $7.37 in 2Q. Net premiums earned was $237 million with what looks to be an average premium margin of 53 basis points. MGIC's single premium percentage fell to 18% from 21% in 2Q. Incurred losses were $60.9 million, up from $46.6 million last quarter and down from $76.5 million in 3Q15. Paid claims fell to $161 million from $172 million in 2Q16. Management expects to generate NIW of $46 billion in 2016, and IIF (insurance in force) is expected to grow by 4-5% this year, vs. previous expectations of 5% growth. Management noted that it has not seen any signs of market share shifts given ACGL's acquisition of UG, but expects opportunities to arise once the deal closes. The company noted its market share for 3Q was 17-18%.

 

Radian Group Inc. did well also and saw higher net premiums earned, partially offset by a higher loss provision, than analysts were expecting. The higher net premiums earned were because of NIW and IIF both ahead of forecasts. In terms of credit (mortgage insurance), the loss ratio came in at 23.6%, paid claims came in at $83 million, and the loss reserve fell to $822 million from $848 million. Net premiums earned of $238 million, NIW was $15.7 billion (up from $12.9 billion in 2Q and up from $11.2 billion Y/Y), and single premium rose to 27% from 26% in 2Q. It appears that Radian's average premium margin was also about 53 basis points. Premium revenue was stronger than anticipated, driven by a benefit from accelerated single premium revenue recognition, while losses incurred were weaker due to a smaller benefit from reserve adjustments. Most notably, new insurance written was up 40% year over year, better than 15% growth for MTG, and driving acceleration in the pace of insurance-in-force expansion.

 Yesterday the commentary discussed collateral and appraisals, and reminded readers about the Five C's of Credit: capacity, capital, collateral, conditions and character. Let's see what's going on with capacity with a slight twist - do borrowers have the equity?

 LOs know that when it comes to financing residential real estate, no two transactions are the same. For that matter, no two borrowers are the same. This is especially true when it comes to financing properties with less than 20 percent equity or less than 20 percent down payment.

For many years, having less than 20 percent equity in a property meant that the borrowers were forced to encounter less than desirable financing options. For a long period, the only viable financing options for such scenarios were loans with a mandatory mortgage insurance premium.

 During the past year or so, more financing options are becoming available for such scenarios as Fannie and Freddie have joined the FHA in offering low down payment 97% LTV programs. But they aren't catching on. It should be noted, however, that mortgage insurance premiums are now more favorable, less expensive and in some instances, even tax deductible. Nonetheless, it is encouraging to see that other options are now available in the current market place.

 Now, borrowers with less than the 20 percent equity mark can finance properties with a second loan in lieu of mortgage insurance. What may make this option more appealing is that the second loan can now be structured as a standard 30-year fixed rate mortgage. A financing option such as this is more appealing to some borrowers. In many such instances, both the first and second loans in place can both be a standard fixed rate mortgage with the monthly payments of both loans going toward principal and interest with the mortgage interest paid on both loans being tax deductible in many scenarios.

 There are differences between the old 100% CLTV programs of 10-20 years ago. But financing with two fixed-rate loans such as this offers the appeal of being in a more traditional type of financing structure without having a mortgage insurance premium in place. The second loan can be paid down or off without penalty as finances permit. Combined 30-year fixed financing such as this can be used for primary and secondary homes alike and is available to most property types. Processors and LOs know that some scenarios with less than 20 percent equity may be better suited for financing with mortgage insurance and vice versa.

 Possibly refinancing a first or obtaining a second, given appreciating markets, isn't new. Let's go back to the end of 2015 when Black Knight released its Mortgage Monitor report, analyzing data through November 2015. Highlights of the report included that there were currently 5.2 million borrowers who could qualify and benefit from refinancing, which was down from 7 million in April 2015 when rates were less than 3.7 percent. Of these 5.2 million borrowers, almost 2.4 million could save $200 or more each month and 1.9 million could save anywhere from $100-$200 per month. Rates are close to the same as the end of 2015, but if rates rise by half a percent, then 2.1 million borrowers would no longer benefit from a refinance and 3.1 million borrowers would also be out if rates increase by 1 percent.

 At that time Black Knight told us that the amount of equity that homeowners could tap into is $4.2 trillion, up $600 billion over the last year, and about 37 million borrowers have an average of $112,000 in equity. And most markets have appreciated since then! Most of the equity (38 percent) that is accessible is in California alone and 51 percent of "tappable" equity is tied to first lien mortgages with rates below 4 percent. But lenders also know that plenty of those loans have loan level price adjustments that make the actual pricing worse than current rates, lessening the appeal of refinancing, thus investors have not seen a huge wave of refinancing of them.

 What about the flip side - a lack of capacity and LTV available to refinance? Negative equity is when homeowners with a mortgage owed more than their homes were worth. Zillow's negative equity report found that nationally, 12.7% of homeowners fell into this category, which is significantly better than the high of 31.4% in Q1 2012. Chicago is the new leader, replacing Las Vegas in the large housing market with the highest rate of negative equity at 20.3%. The Bay Area has the lowest rates of negative equity among large markets. San Jose and San Francisco are the only two large metros with negative equity below 5%.

 The percentage of homeowners in negative equity has been on a steady decline, driven by a consistent recovery in home values. As negative equity overall continues to fall, the epicenter of underwater homeowners in the U.S. has shifted from the notoriously hard-hit - but quick to recover - Southwest and Southeast, to the long-suffering and sluggish rust belt states and even New Jersey. The shift is reflective of a housing market that has evolved from one driven by largely temporary factors caused by the massive housing boom and bust, to one driven by more fundamental, traditional factors like job growth, supply and demand."

 And what about those that want to buy bank-owned properties? Altisource Portfolio Solutions S.A. (NASDAQ: ASPS), a leading provider of real estate, mortgage and technology services, polled 100 mortgage servicing professionals in attendance at the recent Five Star Conference and Expo in Dallas, the nation's largest gathering of mortgage servicing professionals. The poll finds that participants are optimistic that continued low interest rates will encourage home buying (44 percent) and new financing options from lenders will broaden the buyer pool (39 percent).

The survey indicates that respondents believe offering more financing options to home buyers for auction properties (38 percent) will be a factor in attracting a more consumer-based audience, followed by over a third of respondents (34 percent) who say education about the auction market and the use of real estate agents to promote auction properties (34 percent) will be needed to attract consumer interest in purchasing REO homes. Furthermore, 28 percent of respondents view having access to more robust market data and insights as the most important aspect to make the greatest impact in the REO market.

 "The bank-owned real estate sector was largely untapped by individual home buyers until recently," said John A. Vella, chief revenue officer of Altisource. "Today, individual buyers can benefit from smart financing options like rehab financing, otherwise known as a FHA 203(k) loan, which bundles the home purchase price and renovation costs into a single mortgage. This is a huge step in the right direction because it can help buyers purchase affordable properties from the REO market, especially at a time when inventory is low and housing prices are continuing to climb."

 Yes, rates have slowly been moving higher. This week's move, taking the 10-year back up to yields we last saw in late May, has been attributed to solid economic news out of the United Kingdom (were all those Brexit fears misplaced?), continued decent news out of the United States, and the increasing odds of a Fed increase in short-term rates way off in December. Fortunately, the NY Fed is continuing to buy agency MBS to the tune of about $2 billion a day using money from early pay-offs. By the end of the day yesterday the 10-year had worsened .5 in price, to close at a yield of 1.84%, and agency MBS prices worsened .125-.250 depending on security and coupon.

 For thrills and chills today we've already had the first look at Q3 GDP (+2.9%, higher than expected) and the Q3 Employment Cost Index (+.6%). Coming up is a 2^nd tier number: The University of Michigan Sentiment Index for October which is expected to increase slightly. After the first volley of strong numbers the 10-year is yielding 1.87% with agency MBS prices worse .125.

Happy Halloween

What's scarier, Halloween or Mortgages? Regardless of how you get your news these days, whether it through the news channels, the newspapers or your news-feed from your favorite social media outlet, it can be down-right spooky at times. Mortgage rates can float eerily up and down and you may not know if your chance to lock in a good rate will vanish before your eyes. Does the thought of refinancing make your blood run cold? Do you get the shivers at the thought of applying for a mortgage? As your Licensed Mortgage Loan Originator here at Global Home Finance Inc., let me put your fears to rest and take the mystery out of the mortgage process! Rest assured that we have your best interest at heart. We are a Direct Lender with access to over 45 investors meaning we can get you the best possible rate. All the Licensed Mortgage Loan Originators have over 12 years of experience and are standing by to go to work for you. They can explain the step-by-step process and answer any questions you may have. Global Home Finance's Commitment The rates are still at the lowest they have been (forever). They are record breaking. If you are purchasing a house, you are lucky to be getting a rate so low and if you are refinancing your current mortgage, lock that low rate in before they go back up. The fed has already insinuated they will be begin raising rates in December. We have seen rates as low as 2.75% on a 30 year fixed mortgage. We have also seen credit scores down to 580 be approved as well. You and your Licensed Mortgage Loan Originator will analyze your particular mortgage scenario and will determine the best loan for you.

Call me now at (972) 724-3222 Call for a comprehensive mortgage review and your credit score. Mention you received this email and I take $500 off of your closing costs!!. You must act quickly to improve your financial future before rates go back up. We cannot control the market but can help you take advantage of it. Call me at (972) 724-3222 Sincerely,      Global Home Goblins

© 2016. Global Home Finance Inc | NMLS #316441 | All rights reserved.

Fannie & Freddie Updates From The Conference

By rchrisman@robchrisman.com

After a young couple brought their new baby home, the wife suggested that her husband should try his hand at changing diapers.

"I'm busy," he said, "I'll do the next one."

The next time came around and she asked again. The husband looked puzzled. "Oh! I didn't mean the next diaper. I meant the next baby."

The annual mortgage conference is in full swing, and I am sure that reports of "10 vendors for every 1 residential lender" are exaggerated. Well, maybe not. That aside, for tens of thousands of years, homo sapiens involved in residential lending have used acronyms. What would we do without the ability to abbreviate something? Throw in regulatory reform and its alphabet soup of acronyms and terms, and our heads are swimming. Occasionally I am asked about a list of acronyms of frequently used terms. Here's the latest: Financial Services Glossary. And plural acronyms don't have apostrophes, so it is "LOs" not "LO's"!

Residential folks attending the MBA's conference in are talking about the validation service powered by Desktop Underwriter (DU). The introduction of the Fannie Mae's DU validation service announced earlier this week will redefine how lenders verify income, assets and employment of borrowers. And if the level of conversation at this year's MBA Annual Convention & Expo is any indicator, the ripple effect of these new standards - which are expected to result in fewer borrower documentation requirements and reduce underwriting times - will reverberate throughout the industry for quite some time. Along with this, the updates have the potential to enhance credit risk assessment for lenders, while adding certainty to the information lenders are submitting to DU.

 The changes result from a newly announced data and technology integration with FormFree and The Work Number, an Equifax database that enables instant verification of employment and income (VOE/VOI) via payroll record information from thousands of employers nationwide. Equifax also provides a manual verification solution and a 4506-T tax transcript service that are also being included in Fannie Mae's new service. The FormFree AccountChek integration will support the automation of verification of assets (VOA).

 Fannie Mae has released its timeline for the DU validation service and announced Oct. 24 for income validation and Dec. 10 for the employment and asset validation. This push to add certainty around the data input into DU10 is already driving some leading companies in our industry to collaborate in establishing a "gold standard," if you will, for verifications as part of Desktop Underwriter's validation service.

 Also in conjunction with MBA Annual, following the announcement that its employment and income verifications tools will be integrated with Fannie Mae's Desktop Underwriter DU Validation Service, Equifax also announced that it is working with automated mortgage transaction technology provider, Roostify, to incorporate instant employment and income verification data into Roostify's loan decisioning platform; and that leading income calculation solution provider, LoanBeam, will incorporate Equifax' 4506-T IRS tax transcript service from Equifax tool into its solution by the end of 2016. To further streamline the origination process for borrowers and lenders alike, Equifax also announced from MBA Annual that it will begin a strategic alliance with FormFree's AccountChek web-based platform to provide verification of assets alongside employment and income verification data. This, in effect, will provide lenders with the ability to order, analyze and certify a borrower's financial data within minutes via a secure, web-based platform. Equifax also announced a partnership with SmartZip to enable lenders to better score their databases or to source a list of homeowners likely to sell or move within the next six months. With this level of insight, lenders can further extend the value of their marketing and sales efforts.

 Based on the news coming out, a big theme of this year's annual MBA meeting is automation around the mortgage decisioning and underwriting process. It seems that Equifax, FormFree, and a few other innovative companies have been quick to recognize this and are leveraging some of its unique data sets through products like The Work Number, to bring it to market. That is good news for the industry and consumers.

 Freddie Mac announced a series of enhancements to its 1-year old Loan Advisor Suite designed to cut mortgage origination costs for lenders. These enhancements, which will be available in spring 2017, will reduce costs for lenders and provide greater certainty and valuable insights throughout the loan production process. What's on tap? A no-cost automated appraisal alternative, automated borrower income verification, automated borrower asset verification, and automated assessment of borrowers without credit scores. Freddie Mac said that it also expects that Loan Advisor Suite will "broadly offer" collateral representation and warranty relief in early 2017, which is intended to "significantly relieve" mortgage lenders from the risk of loan repurchase due to appraisal defects.

 Fannie Mae said it has launched a program to streamline its underwriting on mortgages for some borrowers that uses electronic data instead of physical proof of their income, assets and employment. The "Day 1 Certainty" program would also offer relief from representation and warranty for the appraised value of a home and a waiver of its property inspection requirement for many mortgage refinancings. These program features will be available on Dec. 10, Fannie Mae said.

 Certainly "electronic mortgages" are in the future, and a big step recently happened. Last week, the Warehouse Lending group of Santander Bank, NA, funded the first eNote in its warehouse program. Reports indicate that everything went flawlessly, and the note went from closing table to purchase by Fannie Mae in two days.

 In that deal, "radius financial group inc., closed and funded of one of the industry's first 'eClosings.'" The loan was originated, disclosed and closed 100% digitally.

 "When working with radius, consumers can now complete an entirely digitized mortgage. A borrower will initiate the process electronically through the digital application and digital consumer disclosures, and radius then electronically underwrites and approves the loan. Until now, that was the end of the 'electronic' part of the process...radius' new eClosing replaces the current archaic process that requires a borrower to hand sign hundreds of pages. Now, radius will electronically generate the package and securely send it to the closing partner. The consumer will receive an electronic review copy so they can address any questions or concerns in advance.

 "Then the eNotary will launch the DigiSign software at the closing to begin the streamlined process. Consumers can sign the digital pad once, then tap the screen each time they want to add their signature to the official document. The notary also signs once, and his or her signature and seal are automatically noted throughout the document and in the log book. Altogether the eClosing will eliminate hundreds of labor-intensive signatures.

 "With an eClosing, the note/collateral was automatically registered with MERS and then securely sent to partner DocMagic's eVault, where the permanent electronic copy of the asset will be stored, where it can be securely accessed and shared as need. Within minutes rather than days, Fannie Mae had the full collateral package."

 Looking back to loans closed "the old-fashioned way," plenty of borrowers have great (3.75% and below) 30-year mortgages, and a certain percentage have 15-year loans in the 2% range? But if a borrower needs cash, who the heck wants to give up those rates by refinancing? Some do, but most opt for a 2^nd mortgage, or line of credit. And there are certainly older lines that adjust after a certain period. And this has some wondering if the resetting of millions of home equity lines of credit (HELOCs) over the next couple of years result in a wave of defaults? Or will it vanish - remember the feared "tidal wave of foreclosures" that was going to swamp the market but disappeared?

 Just like the "excess properties" were soaked up by buyers and investors due to optimism about the market, what happens with the HELOC situation is based on continued appreciation and low unemployment. But although it is mostly hinged on the overall health of the economy, a new report from TD Bank shows that the threat of big wave of HELOC defaults is real.

 After surveying 800 borrowers with HELOCs (is that statistically significant?), TD Bank produced a "HELOC Reset Measure" that calculates about 43% of U.S. homeowners with HELOCs will be affected when these loans reset. And of these homeowners, about 23% are unprepared for the resulting increases in their monthly payments. But 23% of 43% isn't an overwhelming number (about 12%), and obviously those without HELOCs aren't a concern. But for those who do not have a plan for handling the increase, about 60% say they will not reach out to their servicers or lenders for help.

 The survey shows that some HELOC borrowers don't even know the reset date (often after the 10-year period of interest-only payments) described in their contracts despite communications from lenders. TD tells us that only 19% of respondents understand that a HELOC reset will increase their monthly payments, and more than half (53%) don't know the impact the reset will have on their monthly payments.

 With many HELOCs, when the draw period ends borrowers are required to pay principal and interest, which may increase their monthly payments. But consumers in North America lack an understanding of the basic features and benefits of home equity loan products, according to a new report by Accenture, titled "Unlocking home equity lending through a digitally empowered consumer." Fifty-nine percent did not know that that home equity loans can be used to refinance debt, and nearly half (46 percent) did not know they can be used for non-home purposes.

 Well over half of the respondents were unfamiliar with various options for accessing the funds - 79 percent did not know they can be accessed via credit card, and 59 percent did not know they can be accessed online or via mobile phone. Nearly four in ten (39 percent) did not know they can borrow to the limit of the loan, and 28 percent didn't expect to pay closing costs. 

 This lack of awareness is particularly significant at a time when consumers are tapping into the steadily growing equity in their homes at a rate not seen since the credit crisis nearly a decade ago. Per the Federal Reserve, Americans have more than $13 trillion in equity in their homes, more than double the amount in 2011 of which an estimated $4.5 trillion can potentially be accessed. In the first quarter of 2016, home equity installment loans increased 23.5% year over year (an 8-year high) and home equity lines of credit were up 10%, per Equifax.

 Signaling renewed consumer confidence in the future, the survey also found that borrowers increasingly view home equity loans as a means of making home improvements, less so as a potential source of cash for unseen challenges.

 Respondents who anticipate applying for a home equity loan in the next two years expect to use the funds for home improvements (61 percent), to pay off consumer debt (24 percent), and to invest (22 percent). In comparison, respondents who applied for home equity loans in the past two years used the funds for home improvements (43 percent), paying off consumer debt (31 percent) and to invest (18 percent).

 Accenture's report also found that most customers - 60 percent - who applied for a home equity loan in the past two years did so at their bank branch. However, the use of digital channels will become increasingly important. More than one-fourth (26 percent) of borrowers applied online, and nearly all (93 percent) of those who used a digital capability during the home equity loan process were highly satisfied. Additionally, 81 percent of home equity borrowers conducted research via digital and peer-to-peer sites, representing an opportunity for lenders that become digital leaders.

 The bond market pales in comparison to all of this. Nonetheless, folks watch it, and yesterday rates edged slightly higher on no real news. Put another way, there were more sellers than buyers. And the focus was, and probably will be today, more on the convention than on bond market movements. Monday the 10-year ended the day at 1.76%, and both the 5-year and agency MBS worsened a tick or two.

 Today for excitement we'll have a lot of 2^nd tier numbers: the October Philadelphia Fed Non-manufacturing, August Case-Shiller 20-city Index, August FHFA Housing Price Index, and October Consumer Confidence. The 10-year is yielding 1.78% to start the day and agency MBS prices are a shade worse than Monday afternoon.

Credit Unions Paid How Much To Attorneys?

By rchrisman@robchrisman.com

The first-time flier was very nervous as he buckled his seat belt before takeoff. He turned to the woman in the next seat and asked, "About how often do jetliners like this crash?"

She thought a moment and replied, "Usually, just once."

As thousands of folks prepare to head to Boston for the MBA's conference, they may be asking, "What's in my wallet?" Maybe a little less. The average cost of an out-of-network ATM fee in the U.S. is $4.57, making this the tenth consecutive year of increases. (The surcharge from the ATMs themselves accounts for $2.90 of that total, while the charge from the customer's own bank for using an out-of-network ATM accounts for $1.67.) Heck, it's more expensive than a no-cost home loan!

And for lenders looking for a new marketing product, Equifax (EFX) continues to develop its offering of SmartZip solutions in the mortgage lending marketing space. Recently, EFX started selling the SmartTargeting Platform Powered by SmartZip. SmartTargeting allows a lender to leverage Pre-Mover Scores along with its automated online and offline marketing capabilities to acquire new purchase loans and retain existing customers. Pre-Mover Scores use predictive analytics to enable a lender to score their database or to source a list of homeowners likely to move within the next six months. Lenders can segment their top prospects based on Pre-Mover Scores and allocate their marketing and sales efforts for maximum impact. SmartTargeting is a fully integrated marketing platform which includes Pre-Mover Scores, Targeted Online and Facebook Ads, and Personalized Direct Mail. Contact your EFX sales representative for further information or EMSSalesSupport@Equifax.com.

 Quick congratulations to Ben April. VidVerify, a mortgage industry video communications provider, announced that Mr. April is its new Chief Executive Officer.

 Before going on, I wanted to clear up some name confusion. Yesterday I wrote about a settlement that First American Mortgage Trust, which does business as NXTLoan.com, had with the DOJ over FHA loans. This is not the "First American" that is First American Financial Corporation (parent company of First American Title, First American Trust, First American Mortgage Solutions and a variety of other companies). So it is First American Mortgage Trust, which does business as NXTLoan.com, and CEO Barry Polack, who will pay $1.025 million to settle charges brought by the Department of Justice, not First American Financial Corp!

 As Will Rogers said, "Well, what shall I talk about? I ain't got anything funny to say. All I know is what I read in the papers." The National Credit Union Administration (NCUA - the top U.S. credit union regulator) said it had paid more than $1 billion in legal fees to two law firms to pursue lawsuits against various banks over their sales of toxic mortgage-backed securities before the 2008 financial crisis. NCUA said the contingency fees represented 23% of the $4.3 billion the agency recovered in settlements with banks over their sale of faulty securities to five credit unions that later failed.

 NCUA Board Chairman Rick Metsger said, "Without this fee arrangement, which shifted most of the risk of these legal actions to outside counsel, there would have been no legal investigation of potential claims, no litigation, and no legal recoveries."

 So who ponied up? In no particular order, Morgan Stanley, Bank of America, JPMorgan Chase, Barclays, and last month the NCUA announced a $1.1 billion deal with Royal Bank of Scotland Group. The payouts went to two law firms, Korein Tillery LLC and Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC, which pursued lawsuits against the banks.

 The Federal Housing Finance Agency, which has acted as conservator for mortgage funders Fannie Mae and Freddie Mac since their government takeover in 2008, in September 2015 disclosed paying two other law firms $406.7 million. Reuters reports that, "The sum, which reflected around 2 percent of the $18.7 billion it obtained through settlements and judgments against 16 banks, has likely grown since then amid ongoing litigation by FHFA against RBS."

 Training and events?

 Avoid an application blow up, register for Plaza's webinar on October 25^th.

 Alight, Inc. is hosting its second annual warm-up to the MBA's Accounting and Financial Management Conference. Taking place on November 14th in San Diego, this year's event, Alight Mortgage Innovators 2016, will welcome over 100 firm owners, CEOs and senior finance executives for an afternoon of innovation-themed sessions to help supercharge the independent mortgage banking business. Alight will cap the event with a yacht cruise around San Diego Bay, including food, cocktails and a great chance for networking. Mortgage industry pundit Dave Lykken, host of Lykken on Lending, will broadcast the event live. If you're a firm owner, CEO, or senior finance executive, register now at alightinc.com/forum or contact Sandee McCready.

 And if you're planning out 2017, next September in Chicago MORT is an "unprecedented and transformational mortgage industry event that will evolve attendees' perspective on how they lead their companies. MORT is specifically designed for executives at smaller and mid-tier mortgage companies. Best-of-class speakers from many different disciplines, and customized coaching following MORT will ensure that participants are implementing the vision, systems and tools they experienced there. MORT is assembling an accomplished and distinguished group of 12-15 speakers who will convey new ways of thinking to drive a shift in the attendees' paradigm on how they navigate through industry turmoil and change, while installing long-term sustainable thinking into their business that will optimize their success and enable them to attain maximum capacity. Participants will learn to embrace and leverage change as a competitive advantage, while guiding their companies to prosperity in the new mortgage era." For more information on attending MORT or on corporate sponsorship opportunities, please contact

Gary Baraff.

 Turning to capital markets, one of the big issues that lenders have been faced with in the last eight years are buybacks. Even though they've dropped off since 2012, they're expensive, and often lead to problems leading back to the LO who did the loan. Fannie Mae, according to American Banker, is preparing to offer immediate representation and warranty relief to lenders that use its suite of automated quality-assurance technology. Watch for it in a marketing campaign dubbed "Day 1 Certainty." That name will serve as an umbrella brand for a variety of Fannie Mae tools, including Desktop Underwriter, Collateral Underwriter and EarlyCheck, according to sources familiar with the initiative.

 What lender doesn't want a waiver or an end to a representation or warranty obligation in an electronic mortgage loan system? Lenders want to know, of course, what the price for this will be. And the circumstances under which representation and warranty waivers will be granted are not completely clear. AB reports that the Federal Housing Finance Agency (FHFA, which oversees both Fannie & Freddie) is said to have approved the plan only this week, and an official announcement is expected next week.

 As background, the GSEs created a "representation and warranty framework" that took effect in 2013 and lets lenders off the hook for repurchases three years after eligible loans are acquired. That framework was amended in 2014 to clarify certain guidelines and again in 2016 to include an independent dispute resolution process. The first group of loans eligible for the rep and warrant sunset period just recently matured to the point where lenders can take advantage of it.

 From an LO's perspective, if any government agency can create more certainty in the lending environment, it is a good thing, and could lead to better borrower pricing. Theoretically lenders have to put aside less money for unseen liabilities in the future. "Just give us the rules and a level playing field, and we'll take it from there" is something that CEOs generally say.

 Over at GNMA (aka Ginnie Mae), heads turned with the announcement from GNMA in limiting "outlier refinancings" - impacting lenders that churn their production. It addresses, in part, originators' (and the industry knows who they are) practices that needed to be reined in. Remember that when an investor buys a pool of loans they want them on their books for a long time - not three months - especially if they're paying a premium. It is not a money-making venture to pay 104 for a loan that pays off at 100 five months later. The purpose of the Ginnie Mae Mortgage-Backed Securities (MBS) Program is to attract funding from capital market investors in support of government-insured and guaranteed housing programs, and to provide lower-cost financing for the homeowners those programs are designed to serve. Investor participation in the MBS program depends, in part, on a level of confidence that investment returns can be expected to be reasonably aligned with market conditions.

 Put another way, the APM 1605 memorandum that Ginnie Mae issued is in response to ongoing concerns of elevated prepayment speeds. Effective February 1, 2017, streamline refinance loans will only be eligible for inclusion in Ginnie Mae I single-issuer pools and Ginnie Mae II multi-issuer pools if, at the time of refinance, at least six consecutive monthly payments have been made on the existing loan. Streamline refinances that do not meet this seasoning requirement may only be delivered into Ginnie Mae II custom MBS pools. This requirement will apply to all government-insured or guaranteed streamline refinance programs. This change was made in response to concerns from investors about unusually fast speeds on newer-production GNMA pools, particularly VA.

 Keeping on with capital markets, not much happened price-wise in the bond markets Thursday despite a decent chunk of news. The usual folks were buying MBS (the Fed and banks) and the usual folks were selling MBS and hedging pipelines (lenders); the 10-year ended Thursday yielding 1.75% and agency MBS prices unchanged versus late Wednesday. The same entities will be doing the same thing today, i.e., selling and buying MBS.

 For scheduled news today we have...none. And if you liked the mortgage rates for most of this week, you'll like today's. We find the 10-year wallowing around 1.75% with agency MBS prices unchanged versus yesterday.

Vendor Announcement Mania

By rchrisman@robchrisman.com

Flying to Boston for the MBA's conference? Here's a view you won't see. But probably a more important question is, "Is your cyber secure?" The FFIEC just published some frequently asked questions about cybersecurity worth a read for anyone who has a computer.

 Another week, another settlement with the DOJ over FHA loans. First American Mortgage Trust, which does business as NXTLoan.com, and CEO Barry Polack, will pay $1.025 million to settle charges brought by the Department of Justice, which accused the mortgage lender of submitting false claims on mortgages insured by the Federal Housing Administration. Allegedly First American ignored the FHA's due diligence requirements and falsely certified that First American loans qualified for FHA insurance when they actually did not - all at Polack's direction. The settlement also resolves allegations that Polack falsely certified to the FHA that First American complied with quality control requirements, and failed to report known loan defects. The company joins Wells Fargo, Franklin American, Walter Investment, First Tennessee, First Horizon National, M&T Bank, Freedom Mortgage, Regions Bank, BB&T...

 Vendor news is alive and well heading into the MBA's Boston conference next week.

 Set your loan officers up for success in 2017. Lenders One is launching a one-of-a-kind participative workshop designed exclusively for its members to increase production and "set your LOs up for success in 2017. With best practices from several top 200 originators and sustainable sales strategies led by key industry veteran, Steve Scanlon, originators will participate in dialogue driven, action-oriented experiential exercises designed to transform their work culture. Attendees will not only walk away with the mindset of a world class originator, but also a business plan focused on increasing production in the new year. Click here to secure a spot for this December 8-9 workshop in San Diego! Interested in learning more, stop by Trident Bookstore next Monday or Tuesday during MBA in Boston to meet with the Lenders One team, or contact Susan Malpocker. Interested in membership with Lenders One? Contact Michael Kuentz.

 STRATMOR has just released the October Issue of its STRATMOR Insights Report, which is filled with interesting stuff like a piece by STRATMOR Senior Partner and founder Dr. Matt Lind that quantifies the value of customer (borrower) retention. Dr. Matt's analysis shows that successful borrower retention efforts can increase the servicing value of a new mortgage by one-and-a-half to three times the usual value lenders ascribe to servicing. This increase can then be used to fund price concessions and/or service improvements, which can improve overall competitiveness and, in a positive feedback loop, further increase the probability of retention and the ability to fund additional price concessions and/or service improvements.

 Based on its recently completed Spotlight Survey, Appraisal Process and Turn-Times, STRATMOR also reports in the October Insights issue that, since TRID went into effect a year ago, appraisal fees have increased by nearly 16% along with 79% and 81% increases in appraisal turn-times for purchase and refinance loans respectively. STRATMOR, however, cautions that sharply increase origination volumes coupled with shortages of qualified appraisers undoubtedly account for much of these increases.

 Finally, STRATMOR reports on data from its industry-leading MortgageSAT Borrower Satisfaction Program that revealed that the ways in which mortgage lenders stay in touch with borrowers throughout origination plays a large role in determining satisfaction. When borrowers have to take the initiative, e.g., calling the lender for status updates, satisfaction falls precipitously - to a score of 61 out of 100, the lowest among all of the communication methods polled. Logging into a website, which also requires the borrower to take the initiative, also scored relatively low (84 out of 100).  Conversely, methods in which the lender takes the initiative, e.g., calling the borrower, sending an email, texting or updating status via a mobile application, all resulted in scores above 90. You can view and download STRATMOR's October Insights Report for free by clicking here.

 Vantage Production LLC and Insellerate LLC have teamed up to introduce LoanCurve which combines the power of InSellerate's advanced consumer direct lead and pipeline management system with Vantage Production's VIP loan presentation and marketing automation tools, readily enabling lenders to succeed while minimizing costs. Vantage Production CEO Sue Woodard noted, "Consumer direct lending is very different from traditional retail. The customers are different, the tactics are different and the sales people and their needs are different. With the technology provided by LoanCurve, lenders of all sizes can now serve origination channels using industry-leading automation equipped with interfaces suited to each set of unique end users."

 Alight spread the word that it has more than doubled its customer base since the start of 2016. Industry leaders like Guild and First Guarantee have begun using its SaaS-based financial forecasting solution and in recent news, the firm announced American Pacific Mortgage and Midwest-based Cornerstone Mortgage joined as customers. "Why have more than 30 mortgage banks jumped on board? With Alight, firm owners and CEOs have immediate visibility into the financial implications that decisions and sudden market changes will have on firm financials - cash and P&L - before those decisions are made. Alight's cloud-based solution provides this visibility anytime, anywhere and on any device." And if you're a mortgage bank firm owner, CEO or senior finance professional attending the MBA's AFM conference in San Diego, Alight invites you to be their guest at the 2^nd Annual Alight Mortgage Innovators event on November 14 - the day prior to the AFM conference - for an afternoon of interactive sessions focused on innovative ways to supercharge your firm. Visit alightinc.com/forum to register and get the details. 

 Seroka, providing brand development, marketing and PR services to the mortgage industry, announced its new division, Seroka Digital. The division will focus on the mortgage industry's need for true NextGen digital communications leadership. "The buyer path to choosing a company to work with is much more complex than it used to be. And, Millennials have raised the bar, expecting more from brands than ever before," said John Seroka, Principal. "Many companies are not properly leveraging online channels to target their audiences. Seroka Digital is their answer for driving real engagement and, most importantly, conversions."

 Optimal Blue's robust enterprise mortgage pricing service is now accessible to banks and mortgage originators nationwide that utilize Roostify's innovative technology to deliver a streamlined home lending experience to their borrowers and partners. This strategic alliance of two technology experts will further accelerate and demystify the home loan and closing experience. The combination of Optimal Blue's expertise in pricing, along with the transparency and step-by-step guidance in Roostify's loan application and closing processes, provides increased efficiency and profitability through accurate and precise tools.

 Sindeo announced the launch of its newest technology, SindeoOne. Homebuyers and homeowners looking to refinance can shop and compare over 1000 loan programs by filling out a single application in just 5 minutes - saving them time as well as money, thanks to the ability to find the loan that best suits their unique needs. "SindeoOne guides borrowers through each step of the application process, complete with tips to help them navigate each question and understand how their choices impact their mortgage. Once the application is complete, Sindeo automatically generates a credit report and initiates the underwriting process, instantly verifying eligibility. Gone are the days of completing endless "one off" applications -- Sindeo's integrated process generates a single application that fulfills the needs of multiple lenders and can be completed in as little as 5 minutes, from any device."

 Snapdocs announced a new signing agent verification feature to give mortgage lenders and title companies confidence in the third-party vendors with whom they choose to work. "Pillar 4 of ALTA's revised Best Practices establishes standards for managing and engaging third-party signing professionals, including the requirement of keeping critical documentation on file for an organization's entire signing agent vendor database. infrequent notary searches. For companies without access to the premium Snapdocs online platform, a free online resource has been launched to assist with infrequent notary searches. The online search portal will identify notaries who have gone through Snapdocs verification and satisfy the requirement of being able to produce proof of Errors and Omissions insurance and a state license. In addition, Snapdocs is offering companies a complimentary scan of their notary database to identify notaries who may not satisfy the new ALTA Pillar 4 revisions."

 Turning to the capital markets, most doubt that Congress will actually act and remove Freddie and Fannie from under government conservatorship in 2018. But there are moves afoot that are shifting the risk away from the Agencies, and therefore away from taxpayers, to those who will pay for it. Risk sharing, however, isn't for everyone... just ask Fannie Mae.

 The private mortgage insurance companies in the United States are keenly aware of risk sharing. USMI (acronym self-explanatory?) USMI submitted some documents to the FHFA, which oversees Freddie and Fannie, on its front-end CRT request for input. Here we have the comment letter, press release, and fact sheet on the comment letter.

 People in capital markets know a little something about mitigating risk. Interest rates are back to the "steady as she goes" path, with little exciting news from overseas and even less here. As a proxy for all rates, the yield on the 10-year T-note, which a few days ago was sitting around 1.80%, is back to the mid 1.70% range closing Wednesday at 1.75%, and Wednesday agency MBS prices closed a shade higher.

 Overnight we've had, from Europe's Central Bank, no rate change and nothing new out of its meeting. Here we've had weekly jobless claims from last week (+13k to 260k, higher than forecast) and the Philly Fed Manufacturing Survey (down to +9.7). Coming up are September's Existing Home Sales at 10AM ET, as well as September Leading Indicators. After the ECB meeting and the U.S. initial volley of numbers, the 10-year is at 1.75% with agency MBS prices a tad better than late Wednesday.